November 2004
By Paul A. Eisenstein
An increasingly competitive new-car market, coupled with an increasingly affluent and burgeoning Hispanic economy, is prompting auto industry leaders to refocus attention on the growing Hispanic market.
Each of the Big Three automakers now plans multicultural marketing campaigns as part of broader efforts, and advertising data detail Detroit's shifting strategies. Hispanic Business found that the industry's largest automakers spent a collective $148.2 million in Hispanic-oriented media in 2002 – up nearly 10 percent from the previous year and an increase of nearly tenfold in little more than a decade.
Industry experts say the shift from traditional mass marketing reflects a growing awareness among automakers that they need to distinguish themselves in a supply-heavy market. "When you slice and dice the census data, you realize [Hispanics are] a particularly young population and increasingly affluent ... and as [the Hispanic community] ages and expands, it will absolutely become a more potent force in the automotive market," notes Dan Gorrell, chief analyst with the California-based automotive consulting firm Strategic Visions.
While industry figures vary, in its most recent Consumer Expenditure Intelligence Report, Texas research firm Intellous says that new-vehicle spending by Hispanics grew 82 percent to more than $16 billion from 1997 to 2001. And the Hispanic share of the overall American new vehicle market rose from 4.5 percent to 6.3 percent during that period.
HispanTelligence, the research division of Hispanic Business, estimates Hispanics spent nearly $35 billion in 2002 on new and used vehicles and repairs, accounting for nearly 8 percent of the market. J.D. Power and Associates has estimated that by 2020, fueled by growing purchasing power, Hispanics' share of the auto market could grow to 13 percent.
The figures are even more impressive in the fast-growing light-truck segment of the market. In the period studied by Intellous, Hispanic spending on new trucks surged 33.7 percent, nearly triple the growth rates for African Americans and Anglos. In fact, while the Hispanic share of the light-truck market grew by 4.7 percent, it actually declined for Anglos.
Other data suggest there's reason for automakers to be optimistic about the Hispanic community. The number of cars now on American roads is quickly approaching parity with the human population. But Hispanic households are notably less likely to own or lease multiple cars, according to Mediamark Research – 32.7 percent of Hispanics, compared with 42.3 percent for all Americans. So simply beginning to close that gap would create significant sales opportunities.
The reason for honing in on a particular demographic group is clear to anyone who watches television. Prime-time TV is awash with automotive advertising, and the result is that all but the most stand-out products get lost in the clutter. "It's not a good formula," laments Gary Cowger, president of GM's North American automotive operations. "You pay more money to reach less viewers."
What's more, the new model-year is getting off to an unexpectedly slow start, a serious problem considering there's more production capacity than ever – and more products. While analysts debate the precise number, they generally agree that domestic and foreign-owned automakers will have launched nearly 100 new or significantly updated cars, trucks, and crossovers in the United States between January and December 2004. That's an increase of almost 40 percent over the year before.
And there are few signs that the pace is going to slack off any time soon. Quite the contrary: General Motors promises to launch a massive product assault over the next three years to support the revival of brands such as Saturn, Pontiac, and Buick. Ford is rolling out three separate models just to replace its aging Taurus sedan. And Hyundai is intent on shifting from a niche to mainstream player, a move backed by a wave of cars, trucks, and crossovers.
So Mr. Cowger, like many auto-industry executives these days, is pushing his marketing team to find "non-traditional" ways to reach buyers that the industry has either missed or outright ignored. GM has launched a variety of efforts to connect with the Hispanic community, including ads featuring Mr. Cowger, a Spanish speaker who once headed GM operations in Mexico.
Just before the Athens Olympics, the automaker's Chevrolet division launched an ad campaign dubbed "Súbete," or "come aboard." And Chevy remains the automotive sponsor for the popular Hispanic music awards, El Premio De La Gente. Chevy is even sponsoring appearances by nominees at showrooms in Hispanic communities. And the Pontiac division has signed an endorsement deal with Hispanic race driver Milka Duno to promote the launch of its new G6, a car it considers critical in the brand's revival.
GM is by no means the only automaker targeting Hispanics. Ford invested heavily to target the Hispanic community, among many ethnic groups, with the launch of its redesigned F-Series pickup. And the payoff appears to have been worth it: Ford set all-time sales records in 2004 with the full-size truck.
Spending seems almost certain to continue outpacing the ad market as a whole, and the census data provides only one explanation. There's also a realization that despite old stereotypes, the loyalty of Hispanic buyers is up for grabs. Consider recent data from Mediamark Research, Inc. that shows 46.2 percent of all Hispanics owned a domestic vehicle, but among affluent members of the community, that slipped to 40 percent. Among Americans overall, domestics still accounted for 56.3 of vehicles in the Mediamark survey.
As with other ethnic groups, Hispanics are "sensitive to imagery," says Mr. Gorrell, of Strategic Visions. "They're upwardly mobile and tend to be interested in the brands that have the best image. So that's going to be particularly difficult for weaker brands, especially the domestics." Some of the big domestics already are fighting hard to protect their image. R.L. Polk earlier this year noted that in the first quarter this year, based on total new-vehicle registrations, Toyota topped Ford in sales to Hispanics.
All of this comes amid a variety of trends shaking up and reshaping the new car market that make it more important than ever to appeal to the broadest possible audience. "The market is being atomized," says George Peterson, founder of AutoPacific Inc., an automotive industry think-tank. And it's not just the number of new products, but how they're dividing up the market.
Immediately after World War II, there were just 33 nameplates on sale in the United States, virtually all of them domestic. By 1980, that had grown to 150, and in 2000, the figure hit 208. AutoPacific estimates it should reach 275 by 2009. So where it was once common for a manufacturer to sell 200,000 copies of the typical nameplate, and as many as 1 million of a best-seller like the Chevy Impala, there are few high-volume nameplates left. Today, the average is down to around 80,000 and there are just a handful of Camries and Explorers that can approach 400,000 annually.
Meanwhile, where manufacturers long slotted their products into careful defined niches, they're now intent on drawing outside the lines. Sure, there are plenty of classic sedans, coupes, sports cars, and sport-utility vehicles. But more and more products don't fit any conventional category. The new Ford Freestyle is what industry planners have dubbed a crossover, a blend of car and truck. It looks like an SUV, but shares the same platform as the new Ford Five Hundred sedan. The EXT, a spin-off of Cadillac's hot Escalade sport-utility vehicle, bolts a pickup-style bed to its SUV passenger compartment.
The good news is that there seems to be a car, truck, or crossover to fit virtually every consumer's needs and desires these days. But with so many hard-to-define vehicles selling at such low volumes, "It is not surprising that launching and establishing new products is more difficult today than at any time since the 1950s," a recent AutoPacific study suggested. Now add in the issue of overcapacity: With a flood of new foreign-owned "transplants," domestic assembly lines and products produced abroad but earmarked for the United States, total capacity is pushing past 20 million, even though total vehicle sales this year will barely nudge 17 million.
Manufacturers are fighting for every tenth of a point of market share. And to support their new products, they've rolled out record levels of incentives. Detroit, in particular, has been averaging more than $4,000 in rebates, subsidized loans, and other givebacks on the typical vehicle. And even the Japanese have been running close to $1,500 in incentives in recent months. There's little sign this trend will abate any time soon.
The bottom-line impact is staggering, of course. So manufacturers are desperate for ways to connect to potential buyers. Increasingly, that means that rather than pitch to the mainstream, more and more of the new specialty vehicles are being targeted to niche and ethnic communities, whether gays-and-lesbians, African-Americans, or Hispanics.
For the Hispanic community, then, all the trends are pointing in the right direction. Automakers are no longer taking Hispanic buyers for granted. They're listening to the community and responding with targeted messages. Better yet, what they're saying is backed up by the largest wave of new product in automotive history.
Source: HISPANIC BUSINESS Magazine (Check out the interesting charts that appear here)
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